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CBN investigating banks over forex transactions, to suspend culpable lender from FX market

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By Oludare Mayowa

The Central Bank of Nigeria (CBN) has commenced the investigations of the foreign-exchange transactions of some commercial banks operating in the country.

In a circular signed by the regulatory bank’s director of Trade and Exchange, OS Nnaji, the CBN said it will sanction any bank found culpable after its ongoing investitations.

“In line with its continuing close survelliance of financial markets in general and the FX market in particular, the CBN wishes to remind all banks that it is their reponsibility to not only know their customers (KYC requirements) but also know their customers business’ (KYCB requirments).

“Given these responsibilities and in view of recent occurrences in the market,” the BN would like to remind banks to desist from all and any forms of FX malpractices,” the regulator warned in the circular.

The regulatory bank further stated that it will suspend the foreign exchange licencse of any bank “found culpable with ongoing investigations.”

The licence of any bank found culpable during the investigation, the CBN said would be suspended “for at least a year,” the CBN said.

The apex bank had last week directed banks to publish names and BVN of customers involving in foreign exchange malpractices in a bid to curb fraud in the market.

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Despite the measures adopted by the central bank, the naira has continued to depreciate on the parallel market with the local currency traded at N545 to the dollar on Friday and also fell on the official NAFEX window as well.

At the Investors and Exporters’ (I&E) forex market, the naira depreciated by 0.08 percent as the dollar was quoted at N412 compared with N411.67 the prevous day.

They said most participants maintained bids between N400 and N412.85 per dollar.

Individuals and companies have to rely on the parallel market for their foreign-exchange requirements because the central bank is rationing dollars.

Already, many analysts are rpojecting that the local currency could depreciate further and the regulatory bank is yet to find cure for the dollar shoratge which affect supply in the market.

“The central bank’s capital controls have forced some of the demand to the parallel market,” said Omotola Abimbola, an analyst at Lagos-based investment bank Chapel Hill Denham.

Nigeria plan to raise $3.5 billion in Eurobond next month in a bid to finance this year’s budget deficit, and this is expected to positively impact the country’s forex reserves together with the inflow of the International Monetary Fund’s Special Drawing Rights (SDRs).

Industry players said these forex inflow could be “a window of opportunity” to improve supply and end the arbitrage.

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